Research Exchange: March 2026

Selected Outside Research

Sports Betting Across Borders: Spatial Spillovers, Credit Distress, and Fiscal Externalities

A 2018 Supreme Court decision invalidating a federal law banning sports betting in the U.S. has led to its legalization in 38 states. This has resulted in a proliferation of sports betting activity, primarily in the form of "sportsbook" wagers using mobile or online applications. This paper examines the effects of legalization on betting behavior and consumer financial outcomes. Using vendor-sourced consumer spending data, the study documents that average, within-state, quarterly sportsbook spending per person rises by $46 from a pre-legalization baseline of just $2.50. Notably, betting also spills across state lines, with cross-border spillover effects reaching about 15% of the direct effect for counties within 15 miles of a legal state, fading to near zero by 60 miles. To identify effects on consumer financial outcomes, the study uses the New York Fed Consumer Credit Panel and applies a specially adapted, difference-in-differences framework that exploits the staggered rollout of legalization across states while allowing for spillover effects. A key finding is that sports betting legalization leads to lower credit scores and significantly higher rates of auto and credit card delinquency among active bettors.

Sports Betting Across Borders: Spatial Spillovers, Credit Distress, and Fiscal Externalities

Cash in Motion: Corporate Liquidity and Unsecured Bank Funding

This paper examines the role of non-financial corporations (NFCs) as providers of surplus liquidity into the wholesale money market through short-term bank deposits. The analysis uses a novel dataset constructed from two ECB sources: transaction-level money market data identifying corporate lending, and loan-level data capturing corporate borrowing. Exploiting two natural experiments-the ECB's 2022 interest rate hikes (a return shock) and the COVID-19 pandemic (a cash surplus shock)-the analysis finds that firms with more liquidity responded by expanding their unsecured lending significantly more than cash-constrained peers. Firms deploying liquidity this way hold average cash balances of around 25% of assets and channel nearly a fifth of that into short-term savings deposits averaging 49-day maturities. Strikingly, many firms borrow from one bank while depositing with another, meaning they are effectively redistributing liquidity across the banking system-a function traditionally associated with financial intermediaries rather than NFCs. The authors note some broader implications of the analysis, including that NFC's decisions about where to park cash can help stabilize funding flows during periods of stress.

Cash in Motion: Corporate Liquidity and Unsecured Bank Funding

Optimal Exercise of Brokered Callable Certificates of Deposit

As of 2025, more than $1.2 trillion in certificates of deposit (CDs) were brokered-issued by banks, distributed through brokerage platforms, and traded in secondary markets. Some of these deposits have a provision allowing the issuing bank to call them early at pre-specified dates and prices. This paper examines the pricing and optimal exercise of these callable CDs by computing arbitrage-free values using simulated paths for risk-free interest rates. The paper finds that market CD prices across banks and over time generally track the model's implied values, with observed spreads explained mainly by maturity, market liquidity, and the issuing bank's funding demand as proxied by the at-issuance gap between a CD's arbitrage-free value and its par value. On the callable dimension, the paper finds that markets rarely misprice CDs above their call values at exercise dates, and most banks call their CDs near the theoretically optimal boundary. However, smaller banks with fewer CD issuances show more deviation from optimal behavior, likely reflecting greater sensitivity to funding costs and market frictions.

Optimal Exercise of Brokered Callable Certificates of Deposit

Bail-In or Bailout? Regulatory Power in CoCo Bond Yields

Contingent convertible bonds (CoCos), which convert to equity or suffer write-downs when a bank's capital falls below a trigger level, were introduced after the 2008 financial crisis to shift the cost of bank failures from taxpayers to private investors. While in principle conversion is mechanical, in practice, regulators can exercise substantial discretion over triggering conversion and imposing losses on CoCo investors. Using a panel of listed CoCos with daily yield data - focused primarily on EU, UK and Swiss issuers, this paper investigates cross-jurisdiction differences in CoCo pricing. The analysis finds evidence of a statistically significant and economically meaningful jurisdictional component, after controlling for market conditions, issuer fundamentals, and instrument design. Jurisdictions perceived as more willing to enforce bail-in trade at higher spreads-compensating investors for greater conversion risk.

Bail-In or Bailout? Regulatory Power in CoCo Bond Yields

Private Credit, Balance Sheets, and Financial Stability

This paper examines the capitalization, funding structure and performance of private credit funds and provides an assessment of their financial stability risks, using comprehensive data at both the fund and asset level. These funds appear to be conservatively capitalized, with equity in the range of 65-80% of total assets, and with debt financing primarily taking the form of bank credit lines for managing liquidity. The funds exhibit little to no maturity mismatch and are broadly diversified across industries, geographies and lending strategies. On the performance side, private credit funds generate positive average net returns and have generally repaid their credit obligations. Although based on these characteristics, private credit funds appear unlikely to pose systemic risks. The study cites potential areas of concern as the sector continues to grow, such as their role and performance in a financial stress environment.

Private Credit, Balance Sheets, and Financial Stability

Stress Testing with Multiple Scenarios: A Tale on Tails and Reverse Stress Scenarios

Stress tests typically rely on a multifactor adverse scenario grounded in a shared macro-financial narrative. This paper develops a unified, probabilistic stress-testing approach that integrates three types of stress testing: the traditional multifactor adverse scenario, distributional stress testing (examining a full range of possible outcomes) and reverse stress testing (working backwards from a bad outcome to identify what could cause it). The framework incorporates a model-generated distribution of possible future paths for macro-financial variables and treats stress testing as the problem of selecting and interpreting relevant parts of that distribution. The authors illustrate the approach using a semi-structural model of the euro area banking system to generate a simulated scenario distribution.

Stress Testing with Multiple Scenarios: A Tale on Tails and Reverse Stress Scenarios

Stablecoins and the Future of Payments: Evidence from Financial Markets

Gauging the likelihood that stablecoins will become a meaningful force in payments is a challenge for a number of reasons, including that new payment technologies may diffuse slowly and blockchain data can't distinguish payments for goods and services from investment activity. This paper seeks to sidestep these challenges by analyzing the stock returns of U.S.-listed payment firms around key congressional votes on the GENIUS Act-legislation that established the first U.S. federal regulatory framework for payment stablecoins. It finds that in the five hours following the decisive vote, incumbent payment firms' stock returns were approximately 1% lower than those of other financial firms-a statistically significant gap equating to roughly $21.5 billion in lost market capitalization. In addition, after adjusting for prior anticipation using prediction market data, it estimates that the GENIUS Act reduced the total market value of incumbent payment firms by around 18%, or approximately $300 billion. The effects vary meaningfully across firm types; for instance, larger for firms specializing in cross-border payments and smaller for firms whose business models are built around proprietary networks. Overall, the results offer evidence that financial markets view stablecoins as a competitive threat to the existing payments industry.

Stablecoins and the Future of Payments: Evidence from Financial Markets

The Moneyness of Stablecoins

This paper argues that while stablecoins have grown rapidly and attracted serious regulatory attention, their current legal architecture falls meaningfully short of what is needed for them to function as reliable monetary instruments. Most holders acquire tokens on secondary markets and have no direct contractual relationship with the issuer-terms of service shift key risks onto holders, redemption is a conditional privilege rather than a guaranteed right and holders have no proprietary claim on the reserves backing their tokens. In addition, the paper evaluates the recently enacted GENIUS Act, the first comprehensive federal framework for stablecoin regulation, recognizing it as a meaningful step forward but identifying significant deficiencies and proposing targeted fixes. For instance, discharge capacity-the legal certainty that a stablecoin payment actually extinguishes a debt-is still poorly defined, with no clear rules for when a transfer achieves finality, especially in intermediated transactions. From a broader perspective, the paper argues that the shortcomings of the GENIUS Act reflect "an attempt to retrofit special protections onto a claim whose fundamental legal nature was not fully considered and understood."

The Moneyness of Stablecoins

Cost of Banking for LMI and Minority Communities

This paper explores differences in the cost of banking services using branch-level data on the pricing of retail bank accounts. The analysis indicates that banks operating in low- or moderate-income (LMI) Census tracts charge higher monthly maintenance fees and require larger minimum balances to avoid those fees-both roughly 5 percent higher on average-compared to banks in higher-income areas. Fees and minimums are also significantly higher in predominantly minority Census tracts. The paper additionally finds that much of the disparity can be explained by economic factors: banks in these communities have fewer alternative revenue sources (such as lending income), face higher operating costs and tend to be larger institutions.

Cost of Banking for LMI and Minority Communities

Featured BPI Research

Post-Crisis Government Litigation Led to a Decline in Low-Income Mortgage Lending

Starting in 2011, the DOJ filed a wave of False Claims Act lawsuits against major mortgage lenders, alleging fraud in the origination of FHA-insured loans, which ultimately resulted in 31 large lenders paying a combined $5 billion in settlements. This Bank Policy Institute blog post summarizes the findings of a research paper co-authored by BPI head of research W. Scott Frame, examining the effects of this litigation on the structure of the FHA lending market and the availability of FHA mortgages. This research documents a dramatic exit of large banks from the FHA program, driven by concerns about ongoing legal risk, with the FHA market share of large targeted banks collapsing from over 30% in 2011 to less than 5% by 2017. While nonbank lenders partially filled the gap, the overall FHA market still contracted meaningfully, with counties most dependent on large banks for FHA lending experiencing an estimated 18% decline in FHA originations during 2012-2017. The research further demonstrates that low-income lending was hardest hit-the share of home purchase mortgages going to borrowers with income below 50% of the county median fell from roughly 11% in 2009 to just 6% by 2017, with the decline most severe in rural and underserved communities where fewer alternative lenders were available. At the same time, the litigation produced no measurable improvement in loan quality; for instance, credit scores and debt-to-income ratios showed no statistically significant improvement in areas most affected by the bank pullback.

Post-Crisis Government Litigation Led to a Decline in Low-Income Mortgage Lending

BPI, Columbia Co-Host 10th Annual Conference on Bank Regulation

This post recaps the 10th Annual Conference on Bank Regulation, co-hosted by the Bank Policy Institute and Columbia University's School of International and Public Affairs on February 20, 2026. The conference brought together academics, regulators and practitioners around three themes: innovation and automation, banking supervision and digitalization. The session on innovation and automation featured a paper examining the frequency and effects of bank-initiated, automated increases in credit card limits, and a second paper that looks at how banks' outsourcing to cloud service providers has affected costs and competition in UK lending markets. The session on banking supervision featured research highlighting both the value of supervisory ratings and potentially pro-cyclical aspects of banking supervision. The session on digitalization included a paper investigating the effects of rising cryptocurrency returns on bank deposit and loan growth, and a paper examining Brazil's Pix instant payment system and its implications for bank deposit markets and monetary policy transmission.

BPI, Columbia Co-Host 10^th Annual Conference on Bank Regulation

The Evolving Competition from Nonbanks in Retail Banking Markets: Evidence from the Survey of Consumer Finances

This Bank Policy Institute research post argues that traditional bank merger analysis-which relies heavily on deposit concentration measures among commercial banks-significantly understates the competitive pressure banks actually face, because it largely ignores the growing role of nonbank and fintech lenders. The authors use four waves of the Federal Reserve's Survey of Consumer Finances (SCF) from 2013 to 2022 to track nonbank market share trends across six product categories: credit cards, personal loans, personal lines of credit, checking accounts, brokerage accounts and mutual funds. They also segment consumers by the number of financial relationships they hold and by a financial vulnerability indicator to explore whether nonbanks are competing broadly or targeting specific consumer segments. Across all three consumer credit categories, nonbank market share expanded meaningfully after 2016. The increases were particularly sharp in personal lines of credit (from 3.2% in 2016 to 16% in 2022) and credit cards (from 2.4% to 8.1%). On the savings and investment side, banks lost ground in brokerage accounts and mutual funds between 2016 and 2022, further evidence of a broadly more competitive environment. Nonbank checking accounts remain a small segment but are gradually growing. The risk segmentation analysis reveals a notable pattern: nonbanks' gains in credit cards and personal loans are most pronounced among financially vulnerable, high-risk consumers with multiple accounts. By 2022, more than a quarter of high-risk consumers with three or more credit card accounts had at least one from a nonbank, up from just 5% in 2016.

The Evolving Competition from Nonbanks in Retail Banking Markets: Evidence from the Survey of Consumer Finances

Outside Blog Posts and Research Notes of Interest

Mix Me the Perfect Stress Test

On the Decentralisation of Money, Contracts, and Finance Using Blockchain

CBDC Neutrality, Bank Liquidity, and the Hybrid Nature of Bank Deposits

How Rising Bank Lending to Non-Bank Financial Institutions Reallocates Credit Away from Firms

The Non-Fungible Token Bubble: What Investors Actually Earned

Safeguarding the Treasury Market

Should Credit Card Interest Rates Be Capped at 10 Percent?

Conferences & Symposiums

4/3/2026
Fintech and Financial Institutions Research Conference: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia and University of Delaware
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5/7/2026 - 5/8/2026
13th Annual Conference on Financial Market Regulation: Announcement and Call for Papers
The Securities and Exchange Division of Economic and Risk Analysis
Washington, D.C.
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5/14/2026 - 5/15/2026
Mortgage Market Research Conference
Federal Reserve Bank of Philadelphia
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5/18/2026
2026 Research Conference on Banking Regulation
European University Institute and Bank Policy Institute
Florence, Italy
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5/27/2026 - 5/29/2026
Boulder Summer Conference on Consumer Financial Decision Making
University of Colorado, Boulder
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6/22/2026 - 6/23/2026
Fifth Conference on the International Roles of the U.S. Dollar: Announcement and Call for Papers
Federal Reserve Board, Washington, D.C.
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6/25/2026 - 6/26/2026
2026 New York Fed Innovation Conference
Federal Reserve Bank of New York
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9/2/2026 - 9/3/2026
Edinburgh Financial Technology Conference: Announcement and Call for Papers
University of Edinburgh Business School, Edinburgh, Scotland
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9/10/2026 - 9/11/2026
Higher Education Finance Research Conference: Announcement and Call for Papers
Federal Reserve Bank of Philadelphia
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9/24/2026 - 9/25/2026
Inflation Drivers and Dynamics Conference 2026: Announcement and Call for Papers
Federal Reserve Bank of Cleveland
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11/13/2026
NY Fed - ECB Conference on Nonbank Financial Institutions: Announcement and Call for Papers
Federal Reserve Bank of New York
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11/19/2026 - 11/20/2026
International Conference on Payments and Securities Settlement: Announcement and Call for Papers
Deutsche Bundesbank (Conference Center in Eltville, Germany)
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11/24/2026 - 11/25/2026
25th Annual Bank Research Conference: Announcement and Call for Papers
FDIC's Center for Financial Research, Arlington VA
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